If you're looking to grow your real estate portfolio, acquiring Palm Springs investment property is an excellent way of generating passive income and further building wealth. This guide will help you identify investment opportunities in the local real estate market.
Table of Content
- The Ultimate Guide To Investing In The Palm Springs Area And Coachella Valley
- The Advantages Of Short-Term Rentals In The Palm Springs Area
- The Advantages Of Seasonal Rentals In The Palm Springs Area
- The Best Cities For Short-Term Rentals In The Coachella Valley
- The Return On Investment (ROI) For A Vacation Rental Property In The Palm Springs Area
- Check Our Portfolio Of The Best Real Estate Properties In Palm Springs
THE ULTIMATE GUIDE TO INVESTING IN THE PALM SPRINGS AREA AND COACHELLA VALLEY
Palm Springs is an upscale resort city known for luxury hotels, fine dining restaurants, golf courses, and perfect weather. Named for the natural hot springs in the area, "The Golf Capital of the World" has been a favorite among the Hollywood elite since the 1930s with actors, musicians, athletes, and studio executives maintaining homes in the city.
Beyond the fairways and flashing lights, the city is prized for its distinctive architecture. It harbors a fine selection of Mid-Century Modern homes that hark back to America's Golden Age. Palm Springs was a destination for the Modernist architects of the 1920s, who embraced the natural desert landscape and built homes with sleek designs. This unique style of Mid-Century Modern architecture is known as Desert Modernism.
Mediterranean and Spanish Colonial Revival buildings stand alongside these Modern-style homes, a reminder of the strong Spanish influence on the area, and which lends an old world charm to this cosmopolitan city. All this exquisite architecture is set amidst the magnificent backdrop of the San Bernardino, San Jacinto, and Santa Rosa mountains.
Palm Springs more than makes up for its size with big city amenities that can easily rival – if not surpass – those of large and highly urbanized areas. Residents are spoiled for choice when it comes to food, drinks, retail, leisure, and entertainment.
Its first-rate amenities combined with endless sunshine makes Palm Springs investment property a huge draw for snowbirds from the Northeast and Canada. The clear, dry summers and cool and comfortable winters are perfect for a spectacular array of outdoor activities. With average temperatures ranging between 45°F and 106°F and rarely exceeding 113°F, residents can enjoy golf, tennis, swimming, hiking, mountain biking, and horseback riding in their own time.
Located on the Coachella Valley's western edge, Palm Springs lies in Central Riverside County, roughly 107 miles east of Los Angeles. Its motto, “The People are the City”, evokes a close-knit community that values a high quality of life.
Is Palm Springs Real Estate a Good Investment?
From tourism to high-profile events, there are many factors that make Palm Springs investment property a sound choice for real estate investors:
TOURISM – Greater Palm Springs had 12.8 million visitors in 2021 alone. That figure includes 12.6 million domestic tourists and over 200,000 international tourists. Luxury travel is a vital component of the local economy with tourists generating significant revenue for government, business, and of course, real estate.
Total visitor spending in Greater Palm Springs amounted to a staggering $6.8 billion and generated about $644 million in local and state tax revenue in 2021. Foreign tourist spending accounted for an estimated $200 million. Most of their spending went towards lodging, food, retail, and recreation.
Lodging, which includes second homes and rentals, generated $1.7 billion in 2021, capturing about 30% of the average visitor dollar. Rental prices have increased, with the average daily room rate in Palm Springs hotels exceeding 2019 levels by roughly 7%. The lodging sector also saw a 54% increase in demand. Tourists helped sustain nearly all employment in lodging as well as more than half of employment in the food and beverage industry. These trends present many opportunities for those who want to acquire Palm Springs investment property.
GROWTH – Palm Springs is home to 44,581 residents as of 2023, up 0.01% since the 2020 census. It welcomed an influx of new residents before and during the pandemic. The revitalization of the desert city appealed to millennials, who were drawn to the boutique hotels, cultural events, and trendy bars and restaurants that opened in the area over the past decade.
Many transplants come to Palm Springs for frequent weekend trips or live in the city on a part-time or seasonal basis. The city also attracts a good number of retirees in search of warm weather and amenity-rich communities where they can live active lifestyles.
NIGHTLIFE – Palm Springs is a globally renowned party town with festivals and events attracting the jet set. Many hotels, bars, and nightclubs in the area have wet bars, poolside DJs, and illuminated dance floors. The White Party, for one, draws more than 300,000 visitors each year with DJ sets and the world's largest LGBTQ+ dance party.
The city has always been a popular party spot for actors, models, and musicians, earning the nickname “Hollywood's Playground”. Many of these party-goers will need a chic place to stay when they snag invites to the hottest events in town.
FESTIVALS AND EVENTS – The Greater Palm Springs area hosts some of the world's most highly anticipated events in music, sports, and cinema, including:
These events attract hundreds of thousands of festival-goers each year, creating steady demand for short-term and seasonal rentals.
JOB MARKET AND SEASONAL WORK – There are more than 7,000 active business licenses in Palm Springs, with about 2,900 companies employing over 26,500 workers. The largest employers in the city are the retail, health, education, and leisure and hospitality sectors.
The city also attracts a large number of seasonal workers, many of whom are creatives, professionals, and hospitality workers looking for contractual employment with festival organizers, art galleries, and resorts. The city's seasonal and year-round workforce contributes to the demand for rental properties.
HOUSING COSTS – It's no secret that Palm Springs commands some of the highest home prices in the U.S. According to Payscale, housing expenses are approximately 43% higher than the national average. New residents and seasonal workers who want to live in Palm Springs but don't want to commit to a home purchase right away will look into the rental market for more flexibility.
PROPERTY VALUES – Palm Springs protects the character and quality of life in the city by placing restrictions on habitat protection, building heights, and tribal lands. By taking proactive measures, the city is able to maintain the desirability of its residential areas and helps keep property values robust.
Short-Term Rentals Versus Seasonal Rentals
Should you use your Palm Springs investment property as a short-term or seasonal rental?
In general, short-term rentals are leased for 30 or fewer days. On the other hand, seasonal rentals are leased for a duration of at least 30 days to six months. Most Airbnb and VRBO rentals are considered short-term rentals. Some cities also have specific rules and regulations for homeshares.
The City of Palm Springs offers the following definitions for two kinds of short-term rentals:
A homeshare refers to property with one or more bedrooms that is rented for 28 days or fewer. The homeowner stays on the property for the duration of the rental period.
A vacation rental refers to any type of accommodation that is rented for 28 days or fewer without the property owner present.
Deciding how you plan on renting out the property will help you locate and identify the right Palm Springs investment property. In recent years, real estate investors have come to prefer seasonal rentals over short-term rentals due to taxes, restrictions, and operating costs.
THE ADVANTAGES OF SHORT-TERM RENTALS IN THE PALM SPRINGS AREA
The Risks of Short-Term Rentals: Why Many Investors Are Choosing Seasonal Rental Over Short Term Rentals
It can be argued that the City of Palm Springs has some of the most stringent and complex regulations on short-term rentals in the U.S. The City Council believes that regulating and limiting short-term rentals are crucial to preserving the residential housing market in Palm Springs. Vacation rentals and homeshares are only permitted within single-family and multi-family zones in Palm Springs.
Some of the main rules and regulations on short-term rentals in Palm Springs include:
Permits must be renewed annually. The application process entails safety inspections and certifications.
Property managers must collect, report, and remit Transient Occupancy Tax (TOT) on a monthly basis
There are occupancy limits on the number of overnight and daytime guests as well as vehicles present on a property for specified periods
Property owners or managers must have a signed contract for each guest stay
Vacation rentals must have a local response contact who can return messages 24 hours per day
A 24-hour noise ordinance requires tenants to keep the volume of their conversations and entertainment down, especially past 9:00 p.m.
The Vacation Rental Compliance Department (VRCD) is in charge of the administration and enforcement of these regulations. The agency is funded by Vacation Rental Registration Permit fees. It also operates a 24-hour Vacation Rental Hotline to handle complaints on short-term rentals.
The Advantages Of Seasonal Rentals In The Palm Springs Area
Seasonal rentals are the more cost-effective option, not just for tenants, but also for property owners. Larger groups can split the cost of a larger rental property that offers more privacy than a hotel while property managers will spend less time looking for a new tenant every few days or weeks. This results in lower turnover rates and lower cleaning costs. It also helps reduce the amount of work that goes into securing permits, drawing up contracts, and collecting rent.
Many groups and families prefer to rent a seasonal home that offers more living space away from other tourists and vacationers. Many vacation homes offer amenities like private pools, outdoor BBQ grills, fire pits, well-equipped kitchens, and washers and dryers for convenience and relaxation. Lastly, staying for an extended period can help them get a better feel for Palm Springs culture and lifestyle before deciding to make an offer on a permanent or second home of their own.
Seasonal rentals are well-suited for the local travel industry, which attracts more visitors during certain months or seasons. Winter is peak season in the city with snowbirds staying from January through April for warm weather activities like golf, hiking, swimming, and lounging poolside.
Seasonal rentals also appeal to high-income earners who are constantly traveling from one city to the next. These tenants prefer the flexibility of luxury rentals to homeownership as renting seasonally enables them to relocate quickly depending on business opportunities and the demands of their career.
Festivals and sporting events attract tenants who want to stay in Palm Springs for an extended period of time so that they can attend multiple events during peak or low season in the city.
Seasonal workers will also find it more convenient to stay in a seasonal rental instead of looking for a new place to stay every few weeks. If their contract gets renewed, or if they end up deciding to stay in Palm Springs indefinitely, they might end up extending or renewing their lease.
The Risks of Seasonal Rentals
In Palm Springs, violations of the Vacation Rental Ordinance may be assessed against the owner of seasonal and long-term rental properties. If the property manager violates rental policies, the property owner will be fined. Likewise, tenants are not allowed to sublet seasonal rentals as short-term rentals and will likely be denied a permit.
These issues can be avoided by working with a trustworthy and reliable property management company that is up-to-date on Palm Springs laws and ordinances on seasonal or long-term rentals. Moreover, identifying which properties are categorized as short-term and seasonal rentals will help you comply with local rules and regulations from the get-go.
The Best Cities For Short-Term Rentals In The Coachella Valley
Some of the Best Cities for Vacation Rental Properties in the Coachella Valley
Aside from Palm Springs, these cities harbor an excellent selection of investment properties in the Coachella Valley:
Desert Hot Springs
A local real estate expert can help you determine the best location for seasonal rentals in the Coachella Valley.
The Best Communities for Vacation Rentals in Palm Springs
Many Palm Springs communities are ripe for investment. From Palm Canyon Drive to 55+ and active adult communities, each community has its own flavor and identity. When looking for investment properties in Palm Springs, work with a real estate agent who understands market trends and housing demand in the area. They will inform you of areas that are zoned for seasonal rentals as well as communities within close proximity to local attractions and events. This will help you maximize your investment in the Palm Springs rental market.
The Return On Investment (ROI) For A Vacation Rental Property In The Palm Springs Area
Although there are many restrictions on short-term and seasonal rentals in Palm Springs, these regulations will allow for a more predictable return on your investment by protecting the character of the city and keeping out distasteful tenants. Moreover, seasonal and long-term rentals are more risk-averse than short-term rentals due to longer contracts and rental periods.
Since Palm Springs' rules on seasonal rental add a layer of complexity to operating and managing your investment property, it's important to work with a team that will help you generate passive income with the least amount of stress.
Check Our Portfolio Of The Best Real Estate Properties In Palm Springs
Locate your next Palm Springs investment property with a team of skilled professionals. The Brady Sandahl Real Estate Group provides access to some of the finest investment properties in the Palm Springs area. Call them at 760-656-679, send them an email, or fill out their contact form for more information on short-term and seasonal rentals in the city.
Their experienced agents are ready to assist you with your real estate investing goals in Greater Palm Springs, including Palm Springs, Palm Desert, La Quinta, and Rancho Mirage. The team offers proactive communication, exceptional service, and fast results.
![Buyers, Here's Your Guide to Make Your Homeownership Dream Alive in 2025 [PART 1]](https://images.squarespace-cdn.com/content/v1/5cb66f819b8fe8749693da1e/1734718760906-X8Y3RDNU0X0J77S7WMV0/buyers%252c%2Bhere%25e2%2580%2599s%2Byour%2Bguide%2Bto%2Bmake%2Byour%2Bhomeownership%2Bdream%2Balive%2Bin%2B2025%2Bbg.png?format=200w)
